Knowledge of Vietnam’s regulations regarding import/export is important for all individuals involved in doing any cross border business with the country. As soon as an investor has started a company, it should be his/her priority to inform employees of all the applicable regulations. Vietnam has a complex regulatory environment that is constantly changing, with authorities often issuing notices and circulars to modify existing procedures on very short notice.
Here are some of the important rules and regulations that businesses should know before they commence their business activities in the region.
Vietnam’s import prohibitions
Let’s first look at the import prohibitions. The Ministry of Industry and Trade (MIT) does not allow some goods to be imported and /or exported across Vietnam’s borders. Some of these products are listed below:
- Petroleum oils
- Used/second-hand items such as automotive and electronics
- Second hand manufacturing equipment
It is highly recommended that traders do some market research to ensure that the product they intend to import is not on any agency’s prohibition list.
Products with challenging regulations
Some products require the trader to meet difficult rules and regulations before they can be imported. The following products are known to be challenging for importers to bring in.
- Telecom products
- Animal food
- Cosmetics products
- Health supplements
Some of these products need an additional license, which is hard to obtain because of the limited number of licenses that the Vietnamese authorities give out. However, in most cases, while obtaining these licenses is not entirely impossible, the amount of work involved as well as the amount of time required makes it a very challenging overall process that can drag out over many weeks and months.
Vietnam’s licensing procedures for import/export
According to Vietnamese law, you don’t need a license to start an import/export business in the country. However, you are required to register your business at the DPI, which is the Department of Planning and Investment. On top of that, if you are starting the business, you also need to acquire an Investment certificate. Even if you already have one, but plan to expand your business, you need to get that adjusted on the Investment Certificate so that it correctly reflects the scope of your business. This whole process can take up to 16 weeks.
Once the trader is licensed to be involved in importation activity, in many cases the product must also be approved by various agencies. If required, traders have to be prepared to produce full ingredient lists, bills of materials and various technical documents to government agencies.
As already mentioned above, every business needs to carefully consider the products that are banned for import or export in the country. In case of any confusion, it is a good idea to consult the relevant circulars or the relevant authorities in the country. However, since there are so many agencies in the country and each one may be introducing new circulars all the time, a market research consultant may be a safer option especially if the product is closely related to the prohibited item.
However, since there are so many agencies in the country and each one may be introducing new circulars at any time, a market research consultant may be a safer option especially if the product is closely related to a prohibited item.
For some products in the list below, the business may need to obtain additional permits from the authorities.
- Products that need to be exported in a controlled quantity mainly due to obligations agreed to in international treaties
- Products that can only be exported in a certain quota that is set by the country of importation
- Products that require import control at the receiving country’s port, as agreed to in international treaties that Vietnam is a signatory of
- Industrial explosives, products that are used to make explosives and chemicals
The regulations that need to be followed are just one part of the process. There are other considerations every business needs to make as well. These can include compliance with everyday laws of the country, government rules on quality standards, food safety and other similar standards.
Duties on imports/exports
Products that pass through the border are subject to duties. There are however some exceptions. These include:
- Products that are only in transit
- Products that are sent abroad, that were manufactured in a Free Trade zone
- Products that are imported into Free Trade zone zones and
- Products that are being transported from one Free Trade zone to another
Some products imported into Vietnam are exempted from the application of tax. The items that are likely liable to be charged with duties include items like minerals, luxury goods, scrap metal, and forest products etc. Duties on products like these can range from zero percent up to forty-five percent.
Luxury goods such as cosmetic products usually attract high import duties. Products that are related to manufacturing like machinery, raw materials and operating supplies usually attract very low duties or in some cases, no duties at all. This step encourages companies to produce at home instead of overseas.
Luxury goods such as cosmetic products usually attract high import duties.
The origin of the products, is also a factor that can sometimes affect the duty computation of any import.
Importers need to pay duties before receiving goods. In order to ensure they are paying the correct duty amount, businesses should consider applying for tariff rulings prior to import.
Taxes on imports
Taxes on import vary from product to product. As already mentioned above, luxury goods will always be heavily taxed whereas goods required for commercial production within the country are taxed in a lower bracket, or in some cases, not taxed at all.
Importers can expect to pay taxes that include:
- Import tax
- SCT – which is the Special Consumption Tax.
- EPT – which is the Environmental Protection Tax
For most products, VAT payable is 10%, although some products attract only 5% or even 0%.
In general, there are different types of import tax rates:
- Preferential tax rates
- Special preferential tax rates
- Ordinary tax rates
Preferential Tax Rates:
These rates are applicable on products that originate from regions that Vietnam recognizes itself to be on “MFN” (Most Favored Nation) terms with.
The term MFN is somewhat misleading since in reality, most products from most countries will attract this rate in Vietnam
Special Preferential Rates:
These rates are applicable on products that originate from regions with special agreements or preferences with regards to the computation of import taxes. For instance, ASEAN nations can enjoy lower duty rates on qualifying products manufactured in ASEAN due to the ATIGA Free Trade Agreement.
Ordinary Tax Rates
If a trader is importing products from any country that Vietnam does not recognize itself to be on MFN terms with or has no agreement for special preferences on taxes, the trader has to pay the ordinary tax rate. Most of the time this rate is not used.
Goods that are exempt from tax
Some types of products may be exempted from import taxes. These may include:
- Products that are temporarily exported/imported
- Goods that are exported to other countries where they are further processed and re-imported later. Or goods that are imported, processed in Vietnam and re-exported back later
- Products that are imported for the purpose of education activities and research.
- Products that are imported to be part of fixed assets for investment projects whose capital is provided by the ODA (Official Development Assistance)